Harker on monetary policy and the problem of government financing

Today investors were served with several central bankers statements. In the context of the Fed, it is worth recalling that due to the trading scandal, two local Fed presidents - Rosengren and Kaplan - resigned. Today, the head of the Philadelphia Fed, Harker, spoke before the panel discussion at ECB Forum. He is considered a hawk but is not a voting member in 2021 and 2022.

• If there is no agreement in Congress to extend the budget limit, it could have a major economic impact.
• Inflation will remain above 4% this year and above 2% in 2022
• No interest rate increases are expected before the end of 2022 / beginning of 2023 (current market consensus)
• Harker wants to start slow and methodical tapering, even in November and end the process in the middle of next year (consensus among Fed members)
• Risks to the economy currently pose supply issues and a possible spread of coronavirus
• The Fed's asset purchases are no longer helping the economy at the moment
• Lack of government funding is a potential problem and could weaken confidence in US debt and could cause problems for the dollar

Source: InTouch Capital Markets

At the moment, the dollar remains strong against other currencies, but if the government funding problem is not resolved soon, it could have a huge impact on the dollar and bond yields (which may rise, but not because of the positive aspects). Source: xStation5